1. Field of the Invention
The present invention relates to the field of contract administration. More particularly, the present invention relates to efficiently administering a construction contract over a commonly accessible data network.
2. Background Information
Administration of a construction contract is a difficult and time consuming task. Typically, the efficiency with which a contract is administered means the difference between a profitable and unprofitable contract performance, especially from the point of view of the general contractor.
The traditional roles involved in procurement and construction of building and other structures include the owner, the architect, the general contractor and the subcontractor. The architect creates the design of the building or structure through a separate contract with the owner. The design and specification of the project are necessarily quite detailed to enable competing entities to accurately prepare estimates for performing the work and to assure the integrity of the finished structure with respect to the conceptualization. The architect will also normally act as a liaison between the owner and the general contractor, assuring that the project is proceeding and payments are made according to the contract. The architect is also responsible for approving any change orders that are submitted for review by the general contractor over the course of the project.
The general contractor is typically selected by the owner and/or architect through a competitive bidding process based on the detailed design of the project. Each prospective general contractor elicits bids or proposals from subcontractors specializing in areas of contract performance, such as site preparation, plumbing, electrical, masonry, roofing and the like. The general contractor prepares its bid or proposal generally using the subcontractors' estimates, together with its administrative overhead and a percentage markup. Typically, the proposal includes an itemized list or schedule of tasks to be accomplished in furtherance of the project, known as line items. The subcontractors likewise prepare their estimates, based on the design documents provided by the architect, by determining materials and labor needed to accomplish the tasks specific to their respective specialties. The subcontractors also factor in their administrative overhead and percentage markup, and provide their proposed schedule in the form of line items. The subcontractor line items do not generally match the general contractor line items, although each of the subcontractor line items must fit within a line item proposed by the general contractor. Possibly, all of a particular subcontractor's proposed labor, materials, overhead and markup may fall within a single line item of the general contractor.
The owner and/or architect awards the contract to the most desirable general contractor, based on any number of factors. For example, the award may be based solely on the lowest bid of a qualified general contractor. Alternatively, the award decision may include consideration of a weighted combination of factors, including price, experience, references, time availability, or any other factor deemed significant by the owner and/or architect. The selected general contractor then enters a contract with the owner and/or architect, essentially committing the general contractor to the proposed price and schedule. The general contractor in turn contracts with each of its subcontractors to commit them to their respective prices and schedules.
As work on the project under the contract proceeds, periodic payments are made to the general contractor and the subcontractors. The progress of the project and the corresponding payments are closely tracked to assure that the owner is not paying for work that has not yet been performed (unless the owner has agreed to allow the general contractor to “frontload” progress payments, as discussed below) and that the general contractor and the subcontractors are being paid for work that has been performed. Tracking the progress is complicated by the fact that dozens of subcontractors, whose activities are coordinated by the general contractor, are performing integrated tasks at various stages of completion. Each request for payment, each change order request, each payment, and their effects on the status of the overall project presents a significant accounting challenge. Further, contracts often provide for retainage, which is a predetermined percentage of payments held back or retained by the owner until the project has been completed to its satisfaction. Therefore, the amount of payments likewise needs to be accurately tracked to protect the agreed upon retainage amount.
Also, various criteria may need to be met before entering a contract or subcontract, or before making payment to a contractor or subcontractor for completed work. For example, a general contractor may not retain a subcontract who is unable to produce an appropriate insurance certificate or requisite license, for example. Also, a final payment may be withheld unless the general contractor and/or subcontractors provide a lien waiver, indicating that no mechanic's liens will be filed against the property once the requested amount of payment is receive. Likewise, proof of various incurred costs may be required, such as a payroll certificate, indicating payment of employees.
Computer programs have been developed to assist owners, architects and/or general contractors track progress and status of construction projects. However, these programs rely on conventional submission of payment requests and require manual data entry in order to function properly. There currently is no efficient way in which the various contracting parties can efficiently communicate and exchange data relating to the status of contract performance, submission and approval of payment requests, submission and approval of change orders, and the like.
The present invention overcomes the problems associated with the prior art, as described below.